SQL API is a feature that can be integrated into data pipelines to enable direct query execution from applications, providing real-time data retrieval, such as financial scores for users. To utilize SQL API, users must log into their workspace, select or create a project, and ensure their pipeline is functioning correctly before adding the SQL API Action to the pipeline canvas. The SQL API allows for the configuration of queries through a SQL editor where users can specify variables, fields, limits, and offsets to extract the desired data. Once the query setup is complete, users can save their changes and proceed to the API section to access POST and GET options. The process involves using an API Key and URL to send requests from applications and retrieving data based on a task ID, which indicates when the task is completed and data is ready for use.